New England Realty NEN
December 28, 2001 - 4:05pm EST by
2001 2002
Price: 29.50 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 51 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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New England Realty is a limited partnership engaged in the business of
acquiring, developing, holding for investment, operating and selling real
estate. The Partnership, directly or through 22 subsidiary limited
partnerships, owns and operates various residential apartment buildings,
condominium units and commercial properties located in Massachusetts,
Connecticut and New Hampshire. The Partnership owns a 99.67% to 100%
interest in each of the 22 subsidiary partnerships.

This story is pretty simple although it may not be for everyone since it
is a micro cap limited partnership. However, NEWRZ's track record and
valuation are compelling. In 2000, the company generating $8.9 mm in
free cash flow and $5.10 FCF per Share. Free Cash flow is defined as
revenues minus all expenses (including property maintenance) but before
Real Estate Depreciation and dividends. At $29.50 the company is 5.8x FCF.
From an unleveraged standpoint, the company had NOI of $15.4mm in 2000.
EV/NOI is 7.5x, and the cap rate is 13.4%. For 2000 NOI/Interest is 2.4x.

Since 1996 the company grew NOI by 15.9% a year and FCF by 23.8% a year.
The company has done this by getting great cap rates on properties
and focusing on the core business. In 2001 the company is still performing
well even in this difficult environment. The NOI has grown 7.3% this year
and the occupancy at the end of the quarter was about 99%. Most public
apartments REITs trade at 9-10x FFO although they are not the best
comps because they are much more liquid.


I believe that strong operating results will drive the stock price.
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